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AbstractThis study investigates the short‐run and long‐run relationships among stock indices of the US, Europe, Asia, Latin America, and Eastern Europe–Middle East for the pre‐Asian crisis and for the crisis period. The findings from these two periods are compared and contrasted. No long‐run relationship is observed among these indices during the pre‐Asian crisis period. However, during the crisis period, one significant cointegrating vector is observed and more short‐run (i.e., causal) relations are observed in this period as compared to the pre‐crisis period. Based on the analysis, we infer that during the Asian crisis period, the globalization increased and only the European markets directly effected the US market, while the other regional markets indirectly influenced the US market via the European market. As regards the effect of shocks, we observe that during the pre‐Asian crisis period, the response of all regional markets to shocks in other markets is transitory, whereas during the crisis period, the response of the US stock market is transitory but that of EU market is permanent to all other markets.

The financial crisis, after pushing governments to adopt exceptional measures to bail out banks and launch challenging plans to revive the economy, has come to expose the sovereign debt of many countries at risk of ''default''. For this reason, the European institutions and national governments have had to intervene and to develop tools for crisis management, such as loans to Greece and the mechanism of European financial assistance, both to strengthen the devices of crisis prevention, based on fiscal consolidation. Pending the completion of the institutional strategy aimed at coordinating European economic policy and budget, all states were required to adopt drastic measures to rebalance national accounts and return to the Maastricht's criteria. This paper aims to analyze the performance of financial markets over the past tree months, thus representing a true report of what that was and what will happen.

Research Purpose. Stocks as well as other securities are a crucial part of the financial market that helps to redistribute financial resources amongst market participants, which in a modern economy include not only professional stock players but also many common individuals seeking to increase their capital. Previous studies found a strong relationship between the macroeconomic variables and stock returns but often the explanatory power of those models seems to be limited in the applicable region. The aim of this article is to establish whether each region's stock indices have to be predicted based on a separate set of variables. Design / Methodology / Approach. The article uses correlation–regression analysis method to confirm the initial hypothesis regarding regional limitations of such prediction models. Findings. The same set of independent variables cannot be directly applied to different regions because although the chosen Y2B model did provide an accurate relationship between macroeconomic variables and stock indices in the United Kingdom, it failed to provide accurate (usable) results in other regions (Estonia, European Union, France, Germany, Latvia and Lithuania). Originality / Value / Practical implications. The results are important in order to define the way that the smaller and less-researched economies should be examined because detailed researches of power economies such as the United States, the United Kingdom, China or Germany often cannot be directly applied outside the initial research region. Therefore, the need of separate studies for smaller regions such as Baltic States is confirmed.

Research Purpose. Stocks as well as other securities are a crucial part of the financial market that helps to redistribute financial resources amongst market participants, which in a modern economy include not only professional stock players but also many common individuals seeking to increase their capital. Previous studies found a strong relationship between the macroeconomic variables and stock returns but often the explanatory power of those models seems to be limited in the applicable region. The aim of this article is to establish whether each region's stock indices have to be predicted based on a separate set of variables. Design / Methodology / Approach. The article uses correlation–regression analysis method to confirm the initial hypothesis regarding regional limitations of such prediction models. Findings. The same set of independent variables cannot be directly applied to different regions because although the chosen Y2B model did provide an accurate relationship between macroeconomic variables and stock indices in the United Kingdom, it failed to provide accurate (usable) results in other regions (Estonia, European Union, France, Germany, Latvia and Lithuania). Originality / Value / Practical implications. The results are important in order to define the way that the smaller and less-researched economies should be examined because detailed researches of power economies such as the United States, the United Kingdom, China or Germany often cannot be directly applied outside the initial research region. Therefore, the need of separate studies for smaller regions such as Baltic States is confirmed.

AbstractThis article examines the adaptive market hypothesis in the five most important Latin American stock indices. To that end, we apply three versions of the variance ratio test, as well as the Brock-Dechert-Scheinkman test for nonlinear predictability. Additionally, we perform the Dominguez-Lobato and generalized spectral tests to evaluate the Martingale difference hypothesis. Moreover, we consider salient news related to the plausible market inefficiencies detected by these four tests. Finally, we apply a GARCH-M model to assess the risk-return relationship through time. Our results suggest that the predictability of stock returns varies over time. Furthermore, the efficiency in each market behaves differently over time. All in all, the analyzed emerging market indices satisfy the adaptive market hypothesis, given the switching behavior between periods of efficiencies and inefficiencies, since the adaptive market hypothesis suggests that market efficiency and market anomalies might coexist in capital markets.